Local banks compete intensely

Banker Joey Root employs an unusual method to recruit customers to his fledgling First Liberty Bank in northwest Oklahoma City. He's going door to door.

Root, First Liberty's chief executive officer, and his executives walked the residential streets nearest his office to compete in a spirited bank market.

"We figured it was a good way to show people that we really want to be a part of the community, and we're going to come out and ask for your business and ask you to come in and see us,” Root said. "If we got just a few good customers and got some good word of mouth, that's all we're hoping for.”

Root launched his bank in the midst of a sea of competitors. Across the street is a Bank of Oklahoma branch. Every half-mile or so north or south is another rival — Bank of America, BancFirst, Sooner State Bank.

"They're all good banks. We're going to have to work hard to get their business,” Root said.

Oklahoma and its largest metropolitan areas are highly competitive banking markets, Federal Deposit Insurance Corp. statistics show. Oklahoma had the fifth-lowest concentration in its banking market in 2004, the FDIC said.

The state's largest bank, Bank of Oklahoma, controls just more than 11 percent of deposits, and the five biggest institutions manage about one-third of all deposits. By contrast, the five largest banks in Texas hold more than half of all deposits. In Arizona, the three largest banks control nearly two-thirds of state deposits.

Even if the three largest banks in Oklahoma City were merged into a single mega-bank that controlled more than 36 percent of metro's deposits, the FDIC would consider the area to be only "moderately concentrated.” Statewide, a merger of nine of the top 10 banks, omitting the state's largest, Bank of Oklahoma, would create a "moderately concentrated” market.

Brad Swickey, chief executive officer of Valliance Bank, Oklahoma City's second-youngest bank, said the fragmented marketplace requires that smaller banks must find and exploit a niche.

"The in migration of businesses into the Oklahoma market is better than it's been in a couple of decades, but it's certainly not as robust as Dallas or San Antonio,” Swickey said. "Therefore, you've got a lot of banks competing for the same customers.”

Valliance focuses on small and medium-sized businesses, construction lending and private banking for wealthy professionals. The strategy has been successful for Valliance, which began posting profits ahead of schedule.

Customers may be the biggest beneficiaries of the "incredibly tough” competition, said Roger Beverage, chief executive officer of the Oklahoma Bankers Association.

"There's competition on every corner,” Beverage said. "That means better prices, better products, better terms, better conditions. So many people don't think of banks as providing a commodity. But they do, and the product obviously is money.”

Oklahoma ranked 10{+t}{+h} in growth of bank offices between 1994 and 2004, according to the FDIC. State banks added 250 offices in that 10-year period, a growth rate of 25 percent. Since that time, banks have added another 100 offices.

Despite the competitive nature of the market, nearly every Oklahoma bank is profitable.

"That's a reflection of the Oklahoma economy in part,” Beverage said. "Oklahoma bankers are profitable because they are saying yes to people financing good dreams, not pie-in-the-sky dreams. We did that 25 years ago.”

In contrast to the niche marketing of urban banks, Beverage said rural banks seek to diversify as much to avoid volatility associated with a concentrated loan portfolio. A banker in an agricultural community needs to seek opportunities outside that industry, Beverage said.

"It's terrific when wheat and corn and cotton are at the prices they're at today, but go back a couple of years and there was a time when, if you were an ag banker, you thought you were in the wrong business,” he said.